We continue with the series on psychological pitfalls you need to be wary of when investing.
For this round, we look at fallacies, defined as “invalid or faulty reasoning” when constructing an argument or arriving at a conclusion.
Fallacies are common occurrences and there are many present in the investing realm.
In case you missed the first 12 pitfalls, you can catch them in the links below.
Part 1 – click HERE
Part 2 – click HERE
Part 3 – click HERE
Part 4 – click HERE
Let us look at three fallacies that could trip up your investment process.
Fallacy of accident
This fallacy describes a situation where an argument may sound logically valid but produces ridiculous conclusions.
As an example, an investor may have noted that several companies that committed fraud all had names starting with the letter “S”.
The next time he encounters a company with a name starting with “S” that has suspended trading, he automatically assumes that it had committed fraud.
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